PERFORMANCE AWARD AGREEMENT
Exhibit
10.4
THIS
PERFORMANCE AWARD AGREEMENT (this “Agreement”)
is
made effective as of August 1, 2006, between Xxxxxxx Properties, Inc., a
Maryland corporation (the “Company”),
Xxxxxxx Properties, L.P., a Maryland limited partnership (the “Partnership”)
and
Xxxxxx X. Xxxxxxx III (the “Grantee”).
WHEREAS,
the Company maintains the Amended and Restated 2003 Incentive Award Plan of
Xxxxxxx Properties, Inc., Xxxxxxx Properties Services, Inc. and Xxxxxxx
Properties, L.P. (the “Plan”);
WHEREAS,
the Company wishes to carry out the Plan (the terms of which are hereby
incorporated by reference and made a part of this Agreement);
WHEREAS,
the Plan provides for the issuance of performance or incentive awards that
may
be paid in cash, Common Stock or a combination of both (a “Performance
Award”);
WHEREAS,
the Committee, appointed to administer the Plan, has determined that it would
be
to the advantage and in the best interest of the Company and its stockholders
to
issue the Performance Award provided for herein to the Grantee as an inducement
to remain in the service of the Company, the Partnership, the Services Company
and their Subsidiaries as the Chief Executive Officer of the Company, and as
an
incentive for increased efforts during such service, and has advised the Company
thereof and instructed the undersigned officer to issue said Performance Award;
WHEREAS,
certain capitalized terms used herein are defined in Section 13 below; and
WHEREAS,
all capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Plan.
NOW,
THEREFORE, in consideration of the mutual covenants herein contained and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:
1.
Grant
of Performance Award.
(a) For
good
and valuable consideration, effective as of the date hereof (the “Grant
Date”),
the
Company hereby grants to the Grantee the Performance Award upon the terms and
conditions set forth in this Agreement. Notwithstanding anything to the contrary
anywhere else in this Agreement, the Performance Award is subject to the terms,
definitions and provisions of the Plan, which is incorporated herein by
reference.
(b) The
Performance Award represents an incentive bonus that will become vested and
earned based upon the Grantee’s continued employment as the Chief Executive
Officer of the Company and the achievement of the performance goals set forth
in
Section 2 hereof. The actual amount of the Performance Award, if any, will
be
based on the Grantee’s
vested
interest in a percentage of the Excess Shareholder Value, as determined in
accordance with this Agreement. The Grantee’s right in the Performance Award
represents a mere unfunded and unsecured contingent promise to pay by the
Company or the Partnership, as applicable. Neither the Performance Award nor
any
interest therein may be transferred, assigned, alienated or
anticipated.
2.
Vesting
of Performance Award.
(a)
Provided that the Grantee remains continuously employed as the Chief Executive
Officer of the Company until July 13, 2010, in the event that the Company
achieves a compound annual Total Shareholder Return equivalent to at least
15%
during the period commencing on July 14, 2006 and ending on July 13, 2010 (the
“TSR
Target”),
the
Performance Award shall become vested as of July 13, 2010 with respect to a
dollar amount equal to the Performance Award Amount.
(b)
Notwithstanding the foregoing, if (1) a Change in Control occurs prior to July
13, 2010 and the Grantee remains continuously employed as the Chief Executive
Officer of the Company until the date of such Change in Control (the
“Change
in Control Date”),
and
(2) the Company achieves a compound annual Total Shareholder Return equivalent
to at least 15% during the period commencing on July 14, 2006 and ending on
the
Change in Control Date, the Performance Award (determined as set forth below)
shall become vested as of the Change in Control Date with respect to a dollar
amount equal to the Performance Award Amount, and all obligations to the Grantee
in respect of the Performance Award shall be satisfied in full upon payment
thereof. In determining the dollar amount of the Performance Award that shall
become vested upon a Change in Control, the actual compound annual Total
Shareholder Return greater than 15% for the period ending on the Change in
Control Date shall be considered and not a hypothetical TSR Target.
(c)
Notwithstanding the foregoing, in the event of a termination of the Grantee’s
employment as the Chief Executive Officer of the Company for any reason, then,
to the extent the Performance Award (or a portion thereof) has not yet become
vested under Section 2(a) or (b) above, the Grantee’s right to receive any
portion of the Performance Award will thereupon be forfeited by the Grantee,
and
the Company will have no obligations to the Grantee with respect
thereto.
(d)
For
illustrative purposes only, Exhibit
A
to this
Agreement sets forth an example demonstrating the calculation of the Performance
Award Amount using various assumptions.
3.
Payment
of Performance Award.
Not
later than 30 days after July 13, 2010 (or the Change in Control Date, as
applicable), the Company or the Partnership will distribute the amount or value
of such portion of the Performance Award that has become vested (as determined
under Section 2) to the Grantee in the form of shares of Common Stock, subject
to the limits set forth in Article II of the Plan; provided,
however,
that in
no event shall the number of shares of Common Stock distributed with respect
to
the Performance Award exceed 1,400,000 shares (subject to adjustment as provided
in Section 11.3 of the Plan); provided,
further,
that the
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Administrator,
in its sole and absolute discretion, may elect to distribute some or all of
such
vested Performance Award in cash. With respect to any portion of the Performance
Award that is satisfied by the distribution of shares of Common Stock, the
value
of such shares shall be equal to the Fair Market Value (as defined in the Plan)
on the date the Performance Award (or portion thereof) became
vested.
4.
Determinations
by Administrator.
Notwithstanding anything contained herein, all determinations, interpretations
and assumptions relating to the vesting and calculation of the Performance
Award
(including, without limitation, determinations, interpretations and assumptions
with respect to shareholder value, shareholder return and the Performance Award
Amount) shall be made by the Administrator. In making such determinations,
the
Administrator may employ attorneys, consultants, accountants, appraisers,
brokers, or other persons, and the Administrator, the Board, the Company, the
Partnership and their officers and directors shall be entitled to rely upon
the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Administrator or the Board in
good faith and absent manifest error shall be final and binding upon the
Grantee, the Company and all other interested persons. In addition, the
Administrator, in its discretion, may adjust or modify the methodology for
calculating the Performance Award (including, without limitation, the
methodology for calculating shareholder value and shareholder return), as
necessary or desirable to account for events affecting the value of the Common
Stock which, in the discretion of the Administrator, are not considered
indicative of Company performance, such as the issuance of new Common Stock,
stock repurchases, stock splits, issuances and/or exercises of stock grants
or
stock options, and similar events, all in order to properly reflect the
Company’s intent with respect to the performance objectives underlying the
Performance Award or to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available with respect to the Performance
Award.
5.
No
Rights as Stockholder.
Provided that any portion of the Performance Award that becomes vested and
payable is timely distributed in accordance with Section 3 above, the Grantee
shall not be, nor have any of the rights or privileges of, a stockholder of
the
Company in respect of any shares issued upon payment of the Performance Award
(or any portion thereof) unless and until certificates representing such shares
shall have been issued by the Company or the Partnership, as applicable, to
the
Grantee or unless and until such stock ownership is properly entered on the
records of the duly authorized transfer agent of the Company.
6.
Compliance
With Law.
The
Grantee acknowledges that the Plan and this Agreement are intended to conform
to
the extent necessary with all provisions of all applicable federal and state
laws, rules and regulations (including, but not limited to the Securities Act
and the Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, including without limitation
the
applicable exemptive conditions of Rule 16b-3) and to such approvals by any
listing, regulatory or other governmental authority as may, in the opinion
of
counsel for the Company or the Partnership, be necessary or advisable in
connection therewith. Notwithstanding anything herein to the contrary, the
Plan
shall be administered, and the Performance Award is granted, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan, this
3
Agreement
and the Performance Award shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
7.
Code
Section 409A.
Neither
the Performance Award nor any amount payable under this Agreement is intended
to
constitute “nonqualified deferred compensation” within the meaning of Section
409A of the Code. Notwithstanding
any provision of this Agreement to the contrary, in the event that following
the
effective date of this Agreement, the Company or the Partnership determines
that
the Performance Award may be subject to Section 409A of the Code and related
Department of Treasury guidance (including such Department of Treasury guidance
as may be issued after the effective date of this Agreement), the Company or
the
Partnership may adopt such amendments to this Agreement or adopt other policies
and procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Company or the Partnership
determines are necessary or appropriate to (a) exempt the Performance Award
from
Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Performance Award, or (b) comply with
the
requirements of Section 409A of the Code and related Department of Treasury
guidance.
In
the
event that the Performance Award or any amount payable under this Agreement
is
finally determined to constitute “nonqualified deferred
compensation”,
this
Agreement shall be interpreted in accordance with Section 409A of the Code
and
Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the effective date of this Agreement.
8.
Amendment.
This
Agreement and the Plan may be amended without the consent of the Grantee;
provided,
however,
that no
amendment to this Agreement shall, without the consent of the Grantee, adversely
affect or impair any rights of the Grantee under this Agreement
9.
Severability.
In the
event that one or more of the provisions of this Agreement may be invalidated
for any reason by a court, any provision so invalidated will be deemed to be
separable from the other provisions hereof, and the remaining provisions hereof
will continue to be valid and fully enforceable.
10.
Governing
Law.
This
Agreement shall be administered, interpreted and enforced under the internal
laws of the State of California without regard to conflicts of laws
thereof.
11.
Tax
Withholding.
The
Company or the Partnership, as applicable, shall be entitled to require payment
in cash or deduction from compensation (including the Performance Award) payable
to the Grantee of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, vesting, or payment of the Performance
Award. The Administrator may in its discretion and in satisfaction of the
foregoing requirement allow the Grantee to elect to have the Company or the
Partnership, as applicable, withhold shares of Common Stock otherwise issuable
under the Performance Award (or allow the return of shares of Common Stock)
having a Fair Market Value equal to the sums required to be withheld.
Notwithstanding any other provision of the Plan or this Agreement, the number
of
shares of Common Stock which may be withheld with respect to the issuance,
vesting or payment of the Performance Award in order to satisfy the Grantee’s
federal and state income and payroll tax liabilities with respect to the
issuance, vesting or payment of the Performance Award shall be limited to the
number of
4
shares
which have a Fair Market Value on the date of withholding or repurchase equal
to
the aggregate amount of such liabilities based on the minimum statutory
withholding rates for federal and state tax income and payroll tax purposes
that
are applicable to such supplemental taxable income
12.
No
Tax
Advice.
Neither
the Company nor the Partnership has made any warranty or representation to
the
Grantee with respect to the income tax consequences of the transactions
contemplated by this Agreement, and the Grantee is in no manner relying on
the
Company, the Partnership or any of their representatives for an assessment
of
such tax consequences. The Grantee is advised to consult with his or her own
tax
advisor with respect to such tax consequences and the issuance, vesting and
payment of the Performance Award.
13.
Certain
Definitions.
As used
herein, the following terms shall have the meanings specified below, unless
the
context clearly indicates otherwise.
(a)
“Administrator”
shall
have the meaning ascribed to such term in the Plan. The Administrator is
currently the Compensation Committee of the Board.
(b)
“Base
Price”
means
$35.06, which represents the closing trading price of a share of Common Stock
on
the New York Stock Exchange on July 14, 2006.
(c)
“Excess
Shareholder Value”
means,
with respect to the total number of shares of Common Stock and limited
partnership units of the Partnership exchangeable for Common Stock outstanding
as of the Valuation Date, the aggregate positive dollar value, if any, of the
compound annual Total Shareholder Return (as applied to such stock and units)
for the Performance Period in excess of a compound annual Total Shareholder
Return equivalent to 15% for such Performance Period.
(d)
“Performance
Award Amount”
means
10% of the Excess Shareholder Value;
provided, however,
that in
no event shall the dollar value of the Performance Award Amount
exceed the product of (x) 1,400,000
shares of Common Stock (subject to adjustment as provided in Section 11.3 of
the
Plan), and (y) the Fair Market Value (as defined in the Plan) on the date the
Performance Award (or portion thereof) becomes vested.
(e)
“Performance
Period”
means
the period beginning on July 14, 2006 and ending on the Valuation
Date.
(f)
“Total
Shareholder Return”
means
the compound annual return percentage yielded by the excess of the Trailing
Average Fair Market Value, as of the Valuation Date, of a share of Common Stock
outstanding as of July 14, 2006, increased or decreased, as applicable, by
an
amount that would be realized if all cash dividends paid on a share of Common
Stock during the Performance Period were reinvested in Common Stock
on the
applicable dividend payment date, over the Base Price; provided,
however,
that for
purposes of calculating the Total Shareholder Return in the event of a Change
in
Control under Section 2(b) above, Total Shareholder Return shall mean the
compound annual return percentage yielded by the excess of the price per share
of Common Stock paid in connection with such Change in Control, increased
5
by
an
amount that would be realized if all cash dividends paid on a share of Common
Stock during the Performance Period were reinvested in Common Stock on the
applicable dividend payment date, over the Base Price.
(g)
“Trailing
Average Fair Market Value”
means
the average of the closing trading prices of a share of Common Stock on the
principal exchange on which such shares are then traded during the twenty
consecutive trading days ending on the Valuation Date (or ending on the last
trading day preceding the Valuation Date if the Valuation Date does not fall
on
a trading day).
(h)
“Valuation
Date”
means
July 13, 2010; provided,
however,
that in
the event of a Change in Control that occurs prior to July 13, 2010, the
Valuation Date shall mean the Change in Control Date.
[Signature
Page Follows]
6
IN
WITNESS WHEREOF, this Agreement has been executed and delivered by the parties
hereto.
XXXXXXX
PROPERTIES, INC.,
a
Maryland corporation
By:
/s/
Xxxxxxxx X.
XxXxxxx
Name:
Xxxxxxxx X. XxXxxxx
Title:
XXXXXXX
PROPERTIES, L.P.,
a
Maryland limited partnership
By: Xxxxxxx
Properties, Inc., a Maryland corporation
Its: General
Partner
By:
/s/
Xxxxxxxx X.
XxXxxxx
Name:
Xxxxxxxx X. XxXxxxx
Title:
GRANTEE
/s/
Xxxxxx X. Xxxxxxx III
Xxxxxx
X.
Xxxxxxx III
7
EXHIBIT
A
[EXAMPLE
- PERFORMANCE AWARD CALCULATION]
